Citi: Deutsche Telekom Target Price Raised

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Citi: Deutsche Telekom Target Price Raised
Credit: © Reuters.

By Scott Kanowsky -- Analysts at Citi have increased their target price for Deutsche Telekom (OTC: DTEGY ) to €25 a share from €24, citing strong growth in the firm's share price and its ability to handle higher energy costs.

In a note to clients, the bank highlighted the stock's outperformance versus the broader telecommunications sector and European equity market this year. It also expects the German company to receive a €8.9B windfall from the sale of a 51% stake in its towers business to asset manager Brookfield and private equity group DigtalBridge Group, which was first announced in July.

Citi added that Deutsche Telekom's "significant" exposure to the U.S. market through its T-Mobile (NASDAQ: TMUS ) division will help the group weather heavy rises in European fuel costs stemming from the slowdown in westward gas flows out of Russia.

"U.S. energy prices are considerably lower [...] - and have risen considerably less than prices in Europe and Asia, due to different energy supply sources (less imports, shale etc). This is a key positive for DT, given the weighting of TMUS within DT Group," the Citi analysts said.

Despite a weaker outlook for Deutsche Telekom's German unit, Citi still sees the wider group posting annual core earnings before interest, taxes, depreciation, amortization and special losses of €37.5B - topping the company's own forecast of €37B. Citi said this outlook implies that the company, which has already raised its guidance twice in 2022, has "scope for further upgrades."

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